Airlines Poised to Make Record Profits in 2018

International Air Transport Association (IATA) says that 2018 will be another year for airlines to book profits as global industry’s net profit is expected to increase by $3.9 billion from 2017 to 2018. Commercial airlines’ profit is expected to rise to $38.4 billion up from $34.5 billion profit earned during 2017.

This was stated by IATA’s forecast issued from its headquarters in Geneva. Strong demand, efficiency and a reduction in interest payments will help airlines improve net profitability in 2018 despite rising costs.

The next year is expected to be the fourth consecutive year of sustainable profits, with a return on invested capital (9.4%) exceeding the industry’s average cost of capital (7.4%). The following factors affected commercial airlines profits:

A slight decline in operating margin to 8.1% (down from 8.3% in 2017)

An improvement in net margin to 4.7% (up from 4.6% in 2017)

A rise in overall revenues to $824 billion (+9.4% from 2017’s revenues of $754 billion)

An increase in passenger numbers to 4.3 billion (+6.0% from 4.1 billion passengers in 2017)

More cargo carried, at 62.5 million tonnes (+4.5% on the 59.9 million tonnes in 2017)

Slower growth for both passenger (+6.0% in 2018, +7.5% in 2017) and cargo (+4.5% in 2018, +9.3% in 2017) demand

Average net profit per departing passenger of $8.90 (up from $8.45 in 2017)

IATA’s Director General and CEO, Alexandre de Juniac, said that these are good times for the global air transport industry.

Safety performance is solid. We have a clear strategy that is delivering results on environmental performance.

He added,

More people than ever are traveling. The demand for air cargo is at its strongest level in over a decade. Employment is growing. More routes are being opened. Airlines are achieving sustainable levels of profitability. It’s still, however, a tough business, and we are being challenged on the cost front by rising fuel, labor and infrastructure expenses.

Juniac also talk about the challenges faced by airlines around the world and said that challenges are in the hands of governments. Aviation is the business of freedom and a catalyst for growth and development.

He continued,

Governments need to raise their game—implementing global standards on security, finding a reasonable level of taxation, delivering smarter regulation and building the cost-efficient infrastructure to accommodate growing demand. The benefits of aviation are compelling—2.7 million direct jobs and critical support for 3.5% of global economic activity.

He offered to partner with governments to reinforce the foundations for global connectivity that are vital to modern life.